D089 Objective Assessment –Principles of Economics
(2026) Exam (WGU)Questions And Answers Complete
Study Guide Exam.Instant Pdf Download
.
1. Scarcity
The fundamental economic problem forcing societies to make choices is:
A) Inflation
B) Unemployment
C) Scarcity
D) Inequality
Answer: C
Scarcity is the gap between limited resources and unlimited wants. Every society must
choose what, how, and for whom to produce. Inflation, unemployment, and inequality are
consequences or symptoms, not the basic problem.
2. Opportunity Cost
A student gives up an hour of movie enjoyment to study. The forgone enjoyment is:
A) Marginal benefit
B) Sunk cost
C) Opportunity cost
D) Fixed cost
Answer: C
Opportunity cost is the value of the next best alternative forgone. Marginal benefit is the
gain from one more unit; sunk costs are unrecoverable past expenses.
3. Micro vs. Macro
Which branch studies individual households and firms allocating scarce resources?
A) Macroeconomics
B) Positive economics
,C) Normative economics
D) Microeconomics
Answer: D
Microeconomics studies individual decision-making units. Macroeconomics studies
economy-wide phenomena like inflation and GDP.
4. First Principle
According to the ten principles of economics, the first principle is:
A) People respond to incentives
B) Everyone faces trade-offs
C) Trade can benefit everyone
D) Markets are a sound method of organizing activity
Answer: B
Everyone faces trade-offs is the first principle. Because of scarcity, every choice requires
giving something up. Incentives is the fourth principle; trade the fifth; markets the sixth.
5. Incentives
A cigarette tax reduces smoking because it illustrates which principle?
A) Trade can benefit everyone
B) Printing too much money causes prices to rise
C) There is a short-run trade-off between inflation and unemployment
D) People respond to incentives
Answer: D
The fourth principle: people respond to incentives. A tax raises price, creating a
disincentive and reducing quantity demanded.
6. Standard of Living
Which principle states that a nation's standard of living depends on its ability to
produce?
,A) Everyone faces trade-offs
B) Governments may improve market outcomes
C) A nation's standard of living depends on its ability to produce
D) Printing too much money causes prices to rise
Answer: C
The eighth principle. Productivity—output per unit of labor—is the primary determinant of
living standards.
7. Money and Inflation
The ninth principle states that:
A) Printing money stimulates long-term growth
B) Printing money has no effect
C) Printing too much money causes prices to rise
D) Printing money permanently reduces unemployment
Answer: C
Excessive money creation relative to output causes inflation. Short-run output effects may
occur, but persistent money growth raises prices.
8. Positive vs. Normative
Which is a normative economic statement?
A) Raising minimum wage increases unemployment
B) The unemployment rate is 4.5%
C) The government ought to provide free healthcare
D) GDP grew 2% last year
Answer: C
Normative statements contain value judgments ("ought," "should") and cannot be tested.
Positive statements are testable factual claims.
, 9. PPC Interior Point
A point inside the Production Possibilities Curve represents:
A) Economic growth
B) Unattainable combinations
C) Inefficient use of resources
D) Full employment
Answer: C
Points on the curve are efficient; inside points indicate unemployment or inefficiency;
outside points are unattainable. Growth shifts the curve outward.
10. Factors of Production
Which is NOT a factor of production?
A) Land
B) Labor
C) Money
D) Entrepreneurship
Answer: C
The four factors are land, labor, capital, and entrepreneurship. Money facilitates exchange
but does not itself produce goods and services.
11. Command Economy
In a command system:
A) Private individuals own production
B) Markets determine prices
C) Central government allocates resources
D) Consumer sovereignty guides production
Answer: C
Command economies feature government ownership and centralized decisions about
what, how, and for whom to produce.
(2026) Exam (WGU)Questions And Answers Complete
Study Guide Exam.Instant Pdf Download
.
1. Scarcity
The fundamental economic problem forcing societies to make choices is:
A) Inflation
B) Unemployment
C) Scarcity
D) Inequality
Answer: C
Scarcity is the gap between limited resources and unlimited wants. Every society must
choose what, how, and for whom to produce. Inflation, unemployment, and inequality are
consequences or symptoms, not the basic problem.
2. Opportunity Cost
A student gives up an hour of movie enjoyment to study. The forgone enjoyment is:
A) Marginal benefit
B) Sunk cost
C) Opportunity cost
D) Fixed cost
Answer: C
Opportunity cost is the value of the next best alternative forgone. Marginal benefit is the
gain from one more unit; sunk costs are unrecoverable past expenses.
3. Micro vs. Macro
Which branch studies individual households and firms allocating scarce resources?
A) Macroeconomics
B) Positive economics
,C) Normative economics
D) Microeconomics
Answer: D
Microeconomics studies individual decision-making units. Macroeconomics studies
economy-wide phenomena like inflation and GDP.
4. First Principle
According to the ten principles of economics, the first principle is:
A) People respond to incentives
B) Everyone faces trade-offs
C) Trade can benefit everyone
D) Markets are a sound method of organizing activity
Answer: B
Everyone faces trade-offs is the first principle. Because of scarcity, every choice requires
giving something up. Incentives is the fourth principle; trade the fifth; markets the sixth.
5. Incentives
A cigarette tax reduces smoking because it illustrates which principle?
A) Trade can benefit everyone
B) Printing too much money causes prices to rise
C) There is a short-run trade-off between inflation and unemployment
D) People respond to incentives
Answer: D
The fourth principle: people respond to incentives. A tax raises price, creating a
disincentive and reducing quantity demanded.
6. Standard of Living
Which principle states that a nation's standard of living depends on its ability to
produce?
,A) Everyone faces trade-offs
B) Governments may improve market outcomes
C) A nation's standard of living depends on its ability to produce
D) Printing too much money causes prices to rise
Answer: C
The eighth principle. Productivity—output per unit of labor—is the primary determinant of
living standards.
7. Money and Inflation
The ninth principle states that:
A) Printing money stimulates long-term growth
B) Printing money has no effect
C) Printing too much money causes prices to rise
D) Printing money permanently reduces unemployment
Answer: C
Excessive money creation relative to output causes inflation. Short-run output effects may
occur, but persistent money growth raises prices.
8. Positive vs. Normative
Which is a normative economic statement?
A) Raising minimum wage increases unemployment
B) The unemployment rate is 4.5%
C) The government ought to provide free healthcare
D) GDP grew 2% last year
Answer: C
Normative statements contain value judgments ("ought," "should") and cannot be tested.
Positive statements are testable factual claims.
, 9. PPC Interior Point
A point inside the Production Possibilities Curve represents:
A) Economic growth
B) Unattainable combinations
C) Inefficient use of resources
D) Full employment
Answer: C
Points on the curve are efficient; inside points indicate unemployment or inefficiency;
outside points are unattainable. Growth shifts the curve outward.
10. Factors of Production
Which is NOT a factor of production?
A) Land
B) Labor
C) Money
D) Entrepreneurship
Answer: C
The four factors are land, labor, capital, and entrepreneurship. Money facilitates exchange
but does not itself produce goods and services.
11. Command Economy
In a command system:
A) Private individuals own production
B) Markets determine prices
C) Central government allocates resources
D) Consumer sovereignty guides production
Answer: C
Command economies feature government ownership and centralized decisions about
what, how, and for whom to produce.
